GoDaddy 10-Q 2023-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

or

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-36904

GoDaddy Inc.

(Exact name of registrant as specified in its charter)

Delaware												46-5769934
(State or other jurisdiction of incorporation or organization)												(I.R.S. Employer Identification Number)

2155 E. GoDaddy Way

Tempe, Arizona 85284

(Address of principal executive offices, including zip code)

(480) 505-8800

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class						Trading Symbol(s)						Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share						GDDY						NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☒						Accelerated filer			☐
Non-accelerated filer			☐						Smaller reporting company			☐
									Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 28, 2023, there were 154,202,375 shares of GoDaddy Inc.'s Class A common stock, $0.001 par value per share, outstanding and 307,223 shares of GoDaddy Inc.'s Class B common stock, $0.001 par value per share, outstanding.

GoDaddy Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended March 31, 2023

TABLE OF CONTENTS

Note About Forward-Looking Statements						ii
PART I. FINANCIAL INFORMATION
Item 1			Financial Statements (unaudited)			1
			Consolidated Balance Sheets			1
			Consolidated Statements of Operations			2
			Consolidated Statements of Comprehensive Income			3
			Consolidated Statements of Stockholders' Deficit			4
			Consolidated Statements of Cash Flows			5
			Notes to Consolidated Financial Statements			6
Item 2			Management's Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3			Quantitative and Qualitative Disclosures About Market Risk			33
Item 4			Controls and Procedures			36
PART II. OTHER INFORMATION
Item 1			Legal Proceedings			37
Item 1A			Risk Factors			37
Item 2			Unregistered Sales of Equity Securities and Use of Proceeds			76
Item 3			Defaults Upon Senior Securities			76
Item 4			Mine Safety Disclosures			76
Item 5			Other Information			76
Item 6			Exhibits			77
Signatures						78

i

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this Quarterly Report), including the sections titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors," contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), involving substantial risks and uncertainties. The words "believe," "may," "will," "potentially," "plan," "could," "should," "predict," "ongoing," "estimate," "continue," "anticipate," "intend," "project," "expect," "seek," or the negative of these words, or terms or similar expressions conveying uncertainty of future events or outcomes, or that concern our expectations, strategy, plans or intentions, are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, or expected. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements discussed under the heading "Risk Factors" and in our publicly available filings and press releases. These statements include, among other things, those regarding:

• our ability to continue to add new customers and increase sales to our existing customers;

• our ability to develop new solutions and bring them to market in a timely manner;

• our ability to timely and effectively scale and adapt our existing solutions;

• our dependence on establishing and maintaining a strong brand;

• the occurrence of service interruptions and security or privacy breaches and related remediation efforts and fines;

• system failures or capacity constraints;

• the rate of growth of, and anticipated trends and challenges in, our business and in the market for our products;

• our future financial performance, including our expectations regarding our revenue, cost of revenue, operating expenses, including changes in technology and development, marketing and advertising, general and administrative and customer care expenses, and our ability to achieve and maintain future profitability;

• our ability to continue to efficiently acquire customers, maintain our high customer retention rates and maintain the level of our customers' lifetime spend;

• our ability to provide high quality customer care;

• the effects of increased competition in our markets and our ability to compete effectively;

• our ability to grow internationally;

• the impact of fluctuations in foreign currency exchange rates on our business and our ability to effectively manage the exposure to such fluctuations;

• our ability to effectively manage our growth and associated investments, including our migration of the vast majority of our applications and services to the public cloud;

• our ability to integrate acquisitions or our entry into new lines of business and our ability to achieve expected results from our integrations and new lines of business;

• our ability to maintain our relationships with our partners;

• adverse consequences of our substantial level of indebtedness and our ability to repay our debt;

• our ability to maintain, protect and enhance our intellectual property;

• our ability to maintain or improve our market share;

• sufficiency of cash and cash equivalents to meet our needs for at least the next 12 months;

• beliefs and objectives for future operations;

• our ability to stay in compliance with laws and regulations currently applicable to, or which may become applicable to, our business both in the United States (U.S.) and internationally;

• economic and industry trends or trend analysis;

• our ability to attract and retain qualified employees and key personnel;

ii

NOTE ABOUT FORWARD-LOOKING STATEMENTS (continued)

• anticipated income tax rates, tax estimates and tax standards;

• interest rate changes;

• the future trading prices of our Class A common stock;

• our expectations regarding the outcome of any regulatory investigation or litigation;

• the amount and timing of future repurchases of our Class A common stock under any share repurchase program;

• the potential impact of shareholder activism on our business and operations;

• our expectations regarding the effectiveness of our February 2023 restructuring efforts;

as well as other statements regarding our future operations, financial condition, growth prospects and business strategies.

We operate in very competitive and rapidly-changing environments, and new risks emerge from time-to-time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Quarterly Report may not occur, and actual results could differ materially and adversely from those implied in our forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements for any reason after the date of this Quarterly Report to conform such statements to actual results or to changes in our expectations, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless expressly indicated or the context suggests otherwise, references to "GoDaddy," "Company," "company," "we," "us" and "our" refer to GoDaddy Inc. and its consolidated subsidiaries, including Desert Newco, LLC and its subsidiaries (Desert Newco).

iii

Part I - FINANCIAL INFORMATION

GoDaddy Inc.

Consolidated Balance Sheets (unaudited)

(In millions, except shares in thousands and per share amounts)

			March 31,						December 31,
			2023						2022
Assets
Current assets:
Cash and cash equivalents			$	892.4					$	774.0
Accounts and other receivables			68.7						60.1
Prepaid domain name registry fees			456.2						435.7
Prepaid expenses and other current assets			291.1						312.8
Assets held for sale			21.7						—
Total current assets			1,730.1						1,582.6
Property and equipment, net			216.0						225.6
Operating lease assets			75.1						84.1
Prepaid domain name registry fees, net of current portion			206.5						197.1
Goodwill			3,549.1						3,536.9
Intangible assets, net			1,203.4						1,252.2
Other assets			112.1						95.0
Total assets			$	7,092.3					$	6,973.5
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable			$	140.0					$	130.9
Accrued expenses and other current liabilities			383.9						356.7
Deferred revenue			2,043.2						1,954.0
Long-term debt			18.3						18.2
Liabilities held for sale			13.9						—
Total current liabilities			2,599.3						2,459.8
Deferred revenue, net of current portion			795.5						770.3
Long-term debt, net of current portion			3,809.6						3,812.9
Operating lease liabilities, net of current portion			109.9						116.5
Other long-term liabilities			86.9						87.1
Deferred tax liabilities			46.6						56.2
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.001 par value - 50,000 shares authorized; none issued and outstanding			—						—
Class A common stock, $0.001 par value - 1,000,000 shares authorized; 154,114 and 153,830 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively			0.2						0.2
Class B common stock, $0.001 par value - 500,000 shares authorized; 307 and 312 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively			—						—
Additional paid-in capital			1,990.5						1,912.6
Accumulated deficit			(2,489.3)						(2,422.6)
Accumulated other comprehensive income			140.7						178.0
Total stockholders' deficit attributable to GoDaddy Inc.			(357.9)						(331.8)
Non-controlling interests			2.4						2.5
Total stockholders' deficit			(355.5)						(329.3)
Total liabilities and stockholders' deficit			$	7,092.3					$	6,973.5

See accompanying notes to consolidated financial statements.

GoDaddy Inc.

Consolidated Statements of Operations (unaudited)

(In millions, except shares in thousands and per share amounts)

			Three Months Ended March 31,
			2023						2022
Revenue:
Applications & commerce			$	338.0					$	303.1
Core platform			698.0						699.6
Total revenue			1,036.0						1,002.7
Costs and operating expenses(1):
Cost of revenue (excluding depreciation and amortization)			386.1						370.2
Technology and development			215.0						190.1
Marketing and advertising			92.4						116.3
Customer care			76.8						77.7
General and administrative			94.1						90.6
Restructuring and other			52.3						—
Depreciation and amortization			48.5						48.2
Total costs and operating expenses			965.2						893.1
Operating income			70.8						109.6
Interest expense			(45.8)						(33.6)
Other income (expense), net			22.6						(1.1)
Income before income taxes			47.6						74.9
Provision for income taxes			(0.2)						(6.3)
Net income			47.4						68.6
Less: net income attributable to non-controlling interests			0.1						0.2
Net income attributable to GoDaddy Inc.			$	47.3					$	68.4
Net income attributable to GoDaddy Inc. per share of Class A common stock:
Basic			$	0.31					$	0.42
Diluted			$	0.30					$	0.41
Weighted-average shares of Class A common stock outstanding:
Basic			154,124

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The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included in this Quarterly Report as well as our audited financial statements and related notes and the discussion in the "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our 2022 Form 10-K. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategies for our business, includes forward-looking statements involving significant risks and uncertainties. As a result of many factors, such as those set forth in "Risk Factors," actual results may differ materially from the results described in, or implied by, these forward-looking statements.

(Throughout the tables and this discussion and analysis, dollars are in millions, excluding average revenue per user (ARPU), and shares are in thousands.)

Overview

We are a global leader in serving a large market of everyday entrepreneurs, delivering simple, easy-to-use products, and outcome-driven, personalized guidance to small businesses, individuals, organizations, developers, designers and domain investors. We manage and report our business in the following two segments:

• Applications and Commerce (A&C)**, which primarily consists of sales of products containing proprietary software, commerce products and third-party email and productivity solutions as well as sales of certain products when they are included in bundled offerings of our proprietary software products.

• Core Platform (Core)**, which primarily consists of sales of domain registrations and renewals, aftermarket domain sales, website hosting products and website security products when not included in bundled offerings of our proprietary software products as well as sales of products not containing a software component.

Consolidated First Quarter Financial Highlights

Below are our key consolidated financial highlights for the three months ended March 31, 2023, with comparisons to the three months ended March 31, 2022.

• Total revenue of $1,036.0 million, an increase of 3.3%, or approximately 4.7% on a constant currency basis(1).

• International revenue of $340.6 million, an increase of 3.3%, or approximately 7.3% on a constant currency basis(1).

• Total bookings of $1,199.2 million, an increase of 3.7%, or approximately 5.3% on a constant currency basis(1).

• Operating income of $70.8 million, a decrease of 35.4%(2).

• Net income of $47.4 million, a decrease of 30.9%(2).

• Normalized EBITDA(3) of $249.7 million, an increase of 10.5%.

• Net cash provided by operating activities of $270.3 million, an increase of 7.7%.

(1) Discussion of constant currency is set forth in "Quantitative and Qualitative Disclosures about Market Risk."

(2) Our operating results for the three months ended March 31, 2023 included $52.3 million in restructuring and other charges, as further discussed in Note 13 to our financial statements.

(3) A reconciliation of Normalized EBITDA to net income, its most directly comparable GAAP financial measure, is set forth in "Reconciliation of NEBITDA" below.

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the periods presented and as a percentage of our total revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.

			Three Months Ended March 31,
			2023												2022
			$						% of Total Revenue						$						% of Total Revenue
Revenue:
Applications & commerce			$	338.0					32.6		%				$	303.1					30.2		%
Core platform			698.0						67.4		%				699.6						69.8		%
Total revenue			1,036.0						100.0		%				1,002.7						100.0		%
Costs and operating expenses:
Cost of revenue (excluding depreciation and amortization)			386.1						37.3		%				370.2						36.9		%
Technology and development			215.0						20.8		%				190.1						19.0		%
Marketing and advertising			92.4						8.9		%				116.3						11.6		%
Customer care			76.8						7.4		%				77.7						7.8		%
General and administrative			94.1						9.1		%				90.6						9.0		%
Restructuring and other			52.3						5.0		%				—						—		%
Depreciation and amortization			48.5						4.7		%				48.2						4.8		%
Total costs and operating expenses			965.2						93.2		%				893.1						89.1		%
Operating income			70.8						6.8		%				109.6						10.9		%
Interest expense			(45.8)						(4.4)		%				(33.6)						(3.4)		%
Other income (expense), net			22.6						2.2		%				(1.1)						(0.1)		%
Income before income taxes			47.6						4.6		%				74.9						7.4		%
Provision for income taxes			(0.2)						—		%				(6.3)						(0.6)		%
Net income			47.4						4.6		%				68.6						6.8		%
Less: net income attributable to non-controlling interests			0.1						—		%				0.2						—		%
Net income attributable to GoDaddy Inc.			$	47.3					4.6		%				$	68.4					6.8		%

Non-GAAP Financial Measure and Other Operating Metrics

In addition to our results determined in accordance with GAAP, we believe that Normalized EBITDA, a non-GAAP measure, and the following other operating metrics are useful as supplements in evaluating our ongoing operational performance and help provide an enhanced understanding of our business:

			Three Months Ended March 31,
			2023						2022
Normalized EBITDA			$	249.7					$	225.9
Annualized recurring revenue			$	3,543.2					$	3,407.2
Total bookings			$	1,199.2					$	1,156.3
Total customers at period end (in thousands)			20,997						20,859
Average revenue per user			$	197					$	190

Normalized EBITDA (NEBITDA). NEBITDA is a supplemental measure of our operating performance used by management and investors to evaluate our business. We calculate NEBITDA as net income excluding depreciation and amortization, interest expense (net), provision or benefit for income taxes, equity-based compensation expense, acquisition-related costs, restructuring-related expenses and certain other items. We believe that the inclusion or exclusion of certain recurring and non-recurring items provides a supplementary measure of our core operating results and permits useful alternative period-over-period comparisons of our operations but should not be viewed as a substitute for comparable GAAP measures.

Annualized recurring revenue (ARR). ARR is an operating metric defined as quarterly recurring revenue (QRR) multiplied by four. QRR represents the quarterly recurring GAAP revenue, net of refunds, from new and renewed subscription-based services. ARR is exclusive of any revenue that is non-recurring, including, without limitation, domain aftermarket, domain transfers, one-time set-up or migration fees and non-recurring professional website services fees. We believe ARR helps illustrate the scale of certain of our products and facilitates comparisons to other companies in our industry.

Total bookings. Total bookings is an operating metric representing the total value of customer contracts entered into during the period, excluding refunds. We believe total bookings provides additional insight into the performance of our business and the effectiveness of our marketing efforts since we typically collect payment at the inception of a customer contract but recognize revenue ratably over the term of the contract.

Total customers. We define a customer as an individual or entity with paid transactions in the trailing twelve months or with paid subscriptions as of the end of the period. A single user may be counted as a customer more than once if they maintain paid subscriptions or transactions in multiple accounts. Total customers is one way we measure the scale of our business and is an important part of our ability to increase our revenue base.

Average revenue per user. We calculate ARPU as total revenue during the preceding 12 month period divided by the average of the number of total customers at the beginning and end of the period. ARPU provides insight into our ability to sell additional products to customers, though the impact to date has been muted due to our continued growth in total customers.

Reconciliation of NEBITDA

The following table reconciles NEBITDA to net income, its most directly comparable GAAP financial measure:

			Three Months Ended March 31,
			2023						2022
Net income			$	47.4					$	68.6
Depreciation and amortization			48.5						48.2
Equity-based compensation(1)			71.6						61.2
Interest expense, net			38.0						33.2
Acquisition-related expenses			5.0						7.7
Restructuring and other (2)			39.0						0.7
Provision for income taxes			0.2						6.3
NEBITDA			$	249.7					$	225.9

_________________________________

(1)Excludes $2.3 million of equity-based compensation expense associated with our restructuring plan, which is included within restructuring and other.

(2)In addition to the restructuring and other in our statements of operations, this includes lease-related expenses associated with closed facilities, charges related to certain legal matters and adjustments to the fair value of our equity investments.

Revenue

We generate the majority of our revenue from sales of product subscriptions, as described in our 2022 Form 10-K. Our subscriptions can range from monthly terms to multi-annual terms of up to ten years, depending on the product. Revenue is presented net of refunds, and we maintain a reserve to provide for refunds granted to customers.

			Three Months Ended March 31,												Change
			2023						2022						$						%
Applications & commerce			$	338.0					$	303.1					$	34.9					12		%
Core platform			698.0						699.6						$	(1.6)					—		%
Total revenue			$	1,036.0					$	1,002.7					$	33.3					3		%

Total revenue increased 3.3% for the three months ended March 31, 2023 due to the changes in our A&C and Core revenues, as described below:

The 11.5% increase in A&C revenue for the three months ended March 31, 2023 was primarily driven by: (i) 10.1% growth in revenue related to our productivity applications, most notably our email solutions, (ii) 8.0% growth in revenues due to increased customer adoption of our subscription-based products designed to establish and grow online presence, such as Websites + Marketing, and (iii) 104.2% growth in commerce-related revenue.

The 0.2% decrease in Core revenue for the three months ended March 31, 2023 was primarily driven by an 8.0% decrease in aftermarket revenues and a 4.8% decrease in hosting revenues due to end of life migrations away from certain products and lower demand amid the uncertain macroeconomic environment. These decreases were partially offset by a 4.9% increase in domain registration and domain add-on revenue. Domains under management was 84.2 million as of March 31, 2023.

Bookings

The following table presents our total bookings for the periods indicated:

			Three Months Ended March 31,												Change
			2023						2022						$						%
Total bookings			$	1,199.2					$	1,156.3					$	42.9					4		%

The 3.7% increase in total bookings for the three months ended March 31, 2023 was primarily driven by broadened customer adoption of our productivity solutions and our Websites + Marketing product, partially offset by softness in aftermarket demand as well as approximately 160 basis points due to adverse movements in foreign currency exchange rates as a result of the strength of the U.S. dollar. In addition to the currency headwinds, our bookings growth rate was also impacted by uneven demand patterns related to inflation and continued economic uncertainty.

Costs and Operating Expenses

Cost of revenue

Costs of revenue are the direct costs incurred in connection with selling an incremental product to our customers. Substantially all cost of revenue relates to domain registration fees, payment processing fees, third-party commissions and licensing fees for third-party productivity applications. Similar to our billing practices, we pay domain costs at the time of purchase for the life of each subscription but recognize the costs of service ratably over the term of our customer contracts. The terms for domain costs are established by agreements between registries and registrars and can vary significantly depending on the top-level domain (TLD). We expect cost of revenue to increase in absolute dollars in future periods due to increased sales of domains and third-party productivity applications as well as continued growth in our customer base. However, cost of revenue may fluctuate as a percentage of total revenue, depending on the mix of products sold in a particular period.

			Three Months Ended March 31,												Change
			2023						2022						$						%
Cost of revenue (excluding depreciation and amortization)			$	386.1					$	370.2					$	15.9					4		%

The 4.3% increase in cost of revenue for the three months ended March 31, 2023 was primarily attributable to (i) increased software licensing fees resulting from higher sales of productivity solutions; (ii) increased costs associated with the growth of our payment processing business; and (iii) higher domain costs, which were driven by cost increases implemented by various TLD registries.

Technology and development

Technology and development expenses represent the costs associated with the creation, development and distribution of our products and websites. These expenses primarily consist of personnel costs associated with the design, development, deployment, testing, operation and enhancement of our products, as well as costs associated with the data centers and systems infrastructure supporting those products, excluding depreciation expense. We expect technology and development expense to increase in absolute dollars as we continue to invest in product development and migrate our infrastructure to a cloud-based third-party provider. Technology and development expenses may fluctuate as a percentage of total revenue depending on our level of investment in additional personnel and the pace of our infrastructure transition.

			Three Months Ended March 31,												Change
			2023						2022						$						%
Technology and development			$	215.0					$	190.1					$	24.9					13		%

The 13.1% increase in technology and development expenses for the three months ended March 31, 2023 was primarily due to (i) increased personnel costs driven by higher engineering headcount associated with our continued investment in product development and (ii) increased technology costs associated with the growth of our business, advancement of our commerce and innovation strategies and our migration to a cloud-based infrastructure.

Marketing and advertising

Marketing and advertising expenses represent the costs associated with attracting and acquiring customers, primarily consisting of fees paid to third parties for marketing and advertising campaigns across a variety of channels. These expenses also include personnel costs and affiliate program commissions. We expect marketing and advertising expenses to fluctuate depending on both the mix of internal and external marketing resources used, the size and scope of our future campaigns and the level of discretionary investments we make in marketing to drive future sales.

			Three Months Ended March 31,												Change
			2023						2022						$						%
Marketing and advertising			$	92.4					$	116.3					$	(23.9)					(21)		%

The 20.6% decrease in marketing and advertising expenses for the three months ended March 31, 2023 was primarily attributable to a lower level of discretionary spending and headcount reductions resulting from our restructuring plan as discussed in Note 13 to our financial statements.

Customer care

Customer care expenses represent the costs to guide and service our customers, primarily consisting of personnel costs. We expect customer care expenses to fluctuate depending on the methods of customer interaction utilized as well as the level of personnel required to support our business.

			Three Months Ended March 31,												Change
			2023						2022						$						%
Customer care			$	76.8					$	77.7					$	(0.9)					(1)		%

There were no material changes in customer care expenses.

General and administrative

General and administrative expenses primarily consist of personnel costs for our administrative functions, professional service fees, office rent for all locations, all employee travel expenses, acquisition-related expenses and other general costs. We expect general and administrative expenses to fluctuate depending on the level of personnel and other administrative costs required to support our business as well as the significance of any strategic acquisitions we choose to pursue.

			Three Months Ended March 31,												Change
			2023						2022						$						%
General and administrative			$	94.1					$	90.6					$	3.5					4		%

The 3.9% increase in general and administrative expenses for the three months ended March 31, 2023 was primarily due to increased indirect tax related reserves.

Restructuring and other

			Three Months Ended March 31,												Change
			2023						2022						$						%
Restructuring and other			$	52.3					$	—					$	52.3					100		%

Restructuring and other was $52.3 million for the three months ended March 31, 2023. These costs were primarily incurred pursuant to a restructuring plan implemented in February 2023, as further discussed in Note 13 to our financial statements, which included $29.4 million in severance, employee benefits and equity-based compensation, and a $21.0 million charge in connection with the planned disposition of certain assets and liabilities of our hosting business within our Core segment.

Depreciation and amortization

Depreciation and amortization expenses consist of charges relating to the depreciation of the property and equipment used in our operations and the amortization of acquired intangible assets. These expenses may increase or decrease in absolute dollars in future periods depending on our future level of capital investments in hardware and other equipment as well as the

significance of any future acquisitions.

			Three Months Ended March 31,												Change
			2023						2022						$						%
Depreciation and amortization			$	48.5					$	48.2					$	0.3					1		%

There were no material changes in depreciation and amortization.

Interest expense

			Three Months Ended March 31,												Change
			2023						2022						$						%
Interest expense			$	45.8					$	33.6					$	12.2					36		%

The 36.3% increase in interest expense for the three months ended March 31, 2023 was driven by higher effective interest rates on our variable-rate debt.

Other income (expense), net

			Three Months Ended March 31,												Change
			2023						2022						$						%
Other income (expense), net			22.6						(1.1)						$	23.7					2,155		%

The increase in other income (expense) for the three months ended March 31, 2023 was primarily driven by the $14.4 million increase to the carrying value of one of our equity investments, as discussed in Note 2 to our financial statements, as well as increased interest income.

Segment Results of Operations

Our two operating segments, A&C and Core, reflect the way we manage and evaluate the performance of our business. Our CODM evaluates segment performance based upon several factors, of which the primary financial measures are revenue and Segment EBITDA, our segment measure of profitability.

Applications & Commerce

The following table presents the results for our A&C segment for the periods indicated:

			Three Months Ended March 31,												Change
			2023						2022						$						%
Revenue			$	338.0					$	303.1					$	34.9					12		%
Segment EBITDA			$	132.4					$	119.8					$	12.6					11		%

The 11.5% increase in A&C revenue for the three months ended March 31, 2023 was primarily driven by: (i) 10.1% growth in revenue related to our productivity applications, most notably our email solutions, (ii) 8.0% growth in revenues due to increased customer adoption of our subscription-based products designed to establish and grow online presence, such as Websites + Marketing, and (iii) 104.2% growth in commerce-related revenue.

The 10.5% increase in A&C Segment EBITDA for the three months ended March 31, 2023 primarily resulted from the revenue increases noted above, in conjunction with lower discretionary marketing spend. These increases were partially offset by higher personnel costs resulting from headcount additions made to support the continued development of our A&C products.

Core Platform

The following table presents the results for our Core segment for the periods indicated:

			Three Months Ended March 31,												Change
			2023						2022						$						%
Revenue			$	698.0					$	699.6					$	(1.6)					—		%
Segment EBITDA			$	189.0					$	178.4					$	10.6					6		%

The 0.2% decrease in Core revenue for the three months ended March 31, 2023 was primarily driven by an 8.0% decrease in aftermarket revenues and a 4.8% decrease in hosting revenues due to end of life migrations away from certain products and lower demand amid the uncertain macroeconomic environment. These decreases were partially offset by a 4.9% increase in domain registration and domain add-on revenue.

The 5.9% increase in Core Segment EBITDA for the three months ended March 31, 2023 primarily resulted from lower discretionary marketing spend, partially offset by the revenue decreases noted above and cost increases implemented by various TLD registries.

Liquidity and Capital Resources

Overview

Our principal sources of liquidity have been cash flow generated from operations and long-term debt borrowings. Our principal uses of cash have been to fund operations, acquisitions and capital expenditures, as well as to make mandatory principal and interest payments on our long-term debt and to repurchase shares of our Class A common stock.

In general, we seek to deploy our capital in a prioritized manner focusing first on requirements for our operations, then on growth investments, and finally on stockholder returns. Our strategy is to deploy capital, whether debt, equity or internally generated cash, depending on the adequacy and availability of the source of capital and which source may be used most efficiently and at the lowest cost at such time. Therefore, while cash from operations is our primary source of operating liquidity and we believe our internally-generated cash flows are sufficient to support our day-to-day operations, we may use a variety of capital sources to fund our needs for less predictable investment decisions such as strategic acquisitions and share repurchases.

We have incurred significant long-term debt, primarily to fund acquisitions, share repurchases and the settlement of our prior tax receivable agreements. As a result, we are limited as to how we conduct our business and may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities, strategic acquisitions or share repurchases. However, the restrictions under our long-term debt agreements are subject to a number of qualifications and may be amended with the consent of the lenders and the holders of the senior notes, as applicable.

We believe our existing cash and cash equivalents and cash generated by operating activities will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. However, our future capital requirements will depend on many factors, including our growth rate, macroeconomic activity, the timing and extent of spending to support domestic and international development efforts, continued brand development and advertising spend, the level of customer care and general and administrative activities, the introduction of new and enhanced product offerings, the costs to support new and replacement capital equipment, the completion of strategic acquisitions or share repurchases and other factors. Should we pursue additional strategic acquisitions or share repurchases, we may need to raise additional capital, which may be in the form of long-term debt or equity financings.

Credit Facility and Senior Notes

Our long-term debt consists of the Credit Facility and the senior notes described in Note 9 to our financial statements.

Our long-term debt agreements contain covenants restricting, among other things, our ability, or the ability of our subsidiaries, to incur indebtedness, issue certain types of equity, incur liens, enter into fundamental changes including mergers and consolidations, sell assets, make restricted payments including dividends, distributions and investments, prepay junior indebtedness and engage in operations other than in connection with acting as a holding company, subject to customary exceptions. As of March 31, 2023, we were in compliance with all such covenants and had no amounts drawn on our Revolver.

As discussed in Note 10 to our financial statements, we have hedged a portion of our long-term debt through the use of cross-currency and interest rate swap derivative instruments. These instruments help us manage and mitigate our risk of exposure to changes in foreign currency exchange rates and interest rates. See "Quantitative and Qualitative Disclosures About Market Risk" for additional discussion of our hedging activities.

Share Repurchases

As discussed in Note 4 to our financial statements, we are authorized to repurchase up to $3,000.0 million of our Class A common stock. During the three months ended March 31, 2023, we repurchased a total of 1,553 shares of our Class A common stock in the open market for an aggregate purchase price of $113.9 million. As of March 31, 2023, we had $1,586.0 million of remaining authorization available for repurchases.

Restructuring

As further discussed in Note 13 to our financial statements, we implemented a restructuring plan in February 2023 to reduce future operating expenses and improve cash flows through a combination of a reduction in force and a commitment to sell certain assets and liabilities of our hosting business within our Core segment. Cash payments of $6.4 million related to the restructuring were made during the three months ended March 31, 2023, with approximately $20.7 million remaining to be paid as of March 31, 2023. We expect to make substantially all remaining restructuring payments in the second and third quarters of 2023.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

			Three Months Ended March 31,
			2023						2022
Net cash provided by operating activities			$	270.3					$	250.9
Net cash used in investing activities			(22.8)						(12.5)
Net cash used in financing activities			(124.2)						(750.6)
Cash and cash equivalents classified within assets held for sale			(5.2)						—
Effect of exchange rate changes on cash and cash equivalents			0.3						(0.8)
Net increase (decrease) in cash and cash equivalents			$	118.4					$	(513.0)

Operating Activities

Our primary source of cash from operating activities has been cash collections from our customers. Our primary uses of cash from operating activities have been for domain registration costs paid to registries, software licensing fees related to third-party productivity solutions, personnel costs, discretionary marketing and advertising costs, technology and development costs and interest payments. We expect cash outflows from operating activities to be affected by the timing of payments we make to registries as well as increases in personnel and other operating costs as we continue to grow our business.

Net cash provided by operating activities increased $19.4 million from $250.9 million during the three months ended March 31, 2022 to $270.3 million during the three months ended March 31, 2023, primarily driven by the growth in total bookings as well as lower discretionary marketing spending. These were partially offset by increased personnel costs driven by higher engineering headcount to support our growth, higher software licensing fees related to increased sales of third-party productivity solutions and increased costs associated with the growth of our payment processing business.

Investing Activities

Our investing activities generally consist of strategic acquisitions and purchases of property and equipment to support the overall growth of our business. We expect our investing cash flows to be affected by the timing of payments we make for capital expenditures, strategic acquisitions or other growth opportunities we decide to pursue.

Net cash used in investing activities increased $10.3 million from $12.5 million during the three months ended March 31, 2022 to $22.8 million during the three months ended March 31, 2023, primarily due to a $10.5 million increase in capital expenditures.

Financing Activities

Our financing activities generally consist of long-term debt borrowings, the repayment of principal on long-term debt, stock option exercise proceeds and share repurchases.

Net cash used in financing activities decreased $626.4 million from $750.6 million during the three months ended March 31, 2022 to $124.2 million during the three months ended March 31, 2023, primarily due to a $630.4 million decrease in share repurchases.

Deferred Revenue

See Note 7 to our financial statements for details regarding the expected future recognition of deferred revenue.

Off-Balance Sheet Arrangements

As of March 31, 2023 and December 31, 2022, we had no off-balance sheet arrangements that had, or which are reasonably likely to have, a material effect on our financial statements.

Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with GAAP, and in doing so, we make estimates, assumptions and judgments affecting the reported amounts of assets, liabilities, revenues and expenses, as well as the related disclosure of contingent assets and liabilities. We base our estimates, assumptions and judgments on historical experience and on various other factors we believe to be reasonable under the circumstances, and we evaluate these estimates, assumptions and judgments on an ongoing basis. Different assumptions and judgments would change the estimates used in the preparation of our financial statements, which, in turn, could change our results from those reported. We refer to estimates, assumptions and judgments of this type as our critical accounting policies and estimates, which we discussed in our 2022 Form 10-K. We review our critical accounting policies and estimates with the audit and finance committee of our board of directors on an annual basis.

There have been no material changes in our critical accounting policies from those disclosed in our 2022 Form 10-K.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 2 to our financial statements.